Paik Jong-won, celebrity chef and co-CEO of Theborn Korea, speaks during a press conference at Conrad Seoul, Oct. 28. Joint Press Corps

Theborn Korea, a food and beverage franchise founded by celebrity chef Paik Jong-won and set to go public on the KOSPI on Wednesday, faced a significant shortfall in employee stock ownership subscriptions.

This is being interpreted as a sign that employees, who are familiar with the company's internal operations, have reservations about the long-term potential returns of the shares.

According to the firm's securities issuance report on Friday, only 212,666 shares worth 7.21 billion won ($5.2 million) were subscribed out of the initial 600,000 shares allocated for the employee stock ownership program, reflecting a competition rate of 0.35 to 1.

With 713 regular employees at the company, each employee is estimated to have subscribed to an average of 298 shares. Given the public offering price of 34,000 won per share, this amounts to an approximate subscription cost of 10 million won per employee.

The shortfall in the employee stock ownership program was anticipated to some extent.

During the general investor subscription held on Oct. 28 and 29, the number of shares allocated to lead underwriters increased, with Korea Investment & Securities seeing its allotment rise from 450,000 to 540,000 shares, and NH Investment & Securities receiving an increase from 300,000 to 360,000 shares.

According to the firm's investment prospectus, the company can allocate up to an additional 150,000 shares to general subscribers, if unsubscribed shares occur in the employee stock ownership program.

As a result, the company allocated 150,000 of the 387,734 unsubscribed shares to general investors, with the remaining 237,734 shares reallocated to institutional investors.

Since employees who subscribe to the employee stock ownership program are required to hold their shares for one year before selling them, some market watchers interpreted the low subscription rate as a reflection of internal doubts about the company's future growth prospects.

For employees to profit from their shares, the stock price must exceed the offering price after the one-year holding period. However, IPO shares often experience sharp declines over time, which may have contributed to employee hesitation regarding the subscription.

Paik Jong-won, left, celebrity chef and co-CEO of Theborn Korea, and Ahn Sung-jae, Korea's only Michelin 3-star chef, pose during a press conference for the production of the Netflix series "Culinary Class Wars" at JW Marriott Dongdaemun Square in Seoul, Sept. 11. Yonhap

However, some believe that the occurrence of unsubscribed shares is not unusual.

Unlike the secondary Kosdaq, where up to 20 percent of the shares can be allocated to the employee stock ownership program at the discretion of the company, the main KOSPI requires that 20 percent of the public offering shares must be allocated to employees, regardless of demand.

"Since Theborn Korea is a mid-sized company rather than a large corporation, it seems likely that employees were unable to absorb the substantial amount of shares amounting to some tens of millions of won per person," an industry insider noted.

In contrast to the lukewarm response from employees, retail investors showed strong enthusiasm. The competition rate for the general investor subscription reached 772.8 to 1, with the subscription deposit amounting to approximately 11.8 trillion won.

Founded in 1994 by Paik, who has gained more popularity recently following his appearance on the Netflix series "Culinary Class Wars" as one of the judges, Theborn Korea operates 25 restaurant brands, including Paik's Coffee, Hong Kong Banjeom and Saemaeul Sikdang. The company has about 2,900 locations across the country.

The firm is also involved in the distribution business, selling processed foods and sauces to consumers, as well as operating Theborn Hotel on Jeju Island.

It initially sought to go public in 2018, but postponed its plans due to the COVID-19 pandemic. This year, in celebration of its 30th anniversary, it is making another attempt at an IPO.